Business News of 2014-05-06

Non-payment of contractors collapsing businesses

The National Chairman of the Association of Road Contractors (ASROC) Ghana, Mr Joseph Ebo Hewton, says the businesses of many contractors are collapsing, while others have abandoned their sites or are working at a slow pace, as a result of the delay in payment for works executed for as long as 12 to 16 months.

He, therefore, called on the Finance Ministry to forward a memo on the challenges facing the association prepared by the Ministry of Roads and Highways last year to the Cabinet for discussion and approval and submission to Parliament.

Addressing a joint press conference organised in collaboration with the Progressive Road Contractors Association (PROCA) yesterday, Mr Hewton said the road sector of the construction industry had been bedevilled with many problems and cited “the deliberate attempt by the Ministry of Finance to starve the Road Fund of funds” and the scrapping by the Attorney General of the use of unpaid certificates as collateral to apply for loans from the banks as worsening contractors’ plight.

He explained that although at the inception of the road fund the ultimate target of the fuel levy was the equivalent of nine US cents, it could not be achieved because of the continued depreciation of the cedi and the failure of governments to implement the gradual but study increase.

Fund owing contractors

That, he said, had resulted in a reduction by over two-thirds the volume of maintenance work that the funds could be used for, while the fund was owing contractors to the tune of GH¢184 million as of the end of March 2014.

“As we speak, the total kilometres of roads which need to be maintained are over 68,000 and our inability to maintain them means the risk of losing these assets which cost the government several billions of cedis to build,” he said.

According to the ASROC National Chairman, last year the Attorney General and Minister of Justice stopped the issuance of “Letters of Guarantees” and payment cheques in the joint names of contractors and financial institutions or discounting houses, citing that some contractors had diverted cheques and the government had had to contend with judgement debts.

While admitting that those companies that diverted cheques acted wrongly, Mr Hewton asked that they should be punished appropriately, instead of the Attorney General issuing a blanket decision to cancel the arrangement.

“We are by this statement urging the Attorney General to withdraw that directive to prevent the collapse of the road sector,” he said.

Pressure from banks

Delivering a solidarity message, the General Secretary of the Construction and Building Materials Workers Union of the Trades Union Congress, Mr Pius Quainoo, said contractors had been put under intense pressure by their bankers as a result of debts owed the banks.

He said the debts had arisen because the contractors had taken loans to prefinance contracts they had won from government, with the hope that the loans would be paid after they had executed the jobs.

As payments had not been forthcoming, the contractors had been under constant pressure from the banks to repay the loans at interests ranging from 18.52 to 36.80 per cent, he said.

“From last year till now, over 10,000 building and road construction workers have been sent home for no reason other than stoppages of work arising from irregular and non-payments to contractors for jobs executed.

“When contractors are not paid on time, they tend to resort to indecent work practices, including lowering of standards, casual labour employment, disrespect for human and trade union rights and unfair labour practices,” Mr Quainoo said.

He, therefore, urged the government to encourage the formation of infrastructure financing institutions like the defunct Bank for Housing and Construction to provide credit and support for building and construction activities.

He also suggested the provision of protection from default by contractors in the payment of timely interests as a way of encouraging long-term investments in physical infrastructure development.

Source: graphic.com
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